The news that third-quarter revenue had fallen slightly below Wall Street expectations didn't much dampen the spirits of SAP AG executives; they were busy celebrating the fact that more than half of the $1.91 billion they raked in came from mySAP.com, the E-business software venture that is essentially the company's future.
Launched in May 1999 to yawns and outright derision, the Web-based version of the company's flagship R3 product suite, expanded to include a number of "customer-facing" applications, such as customer relationship management and E-procurement, now seems well on its way to meeting the company's goal of accounting for half of all license revenue in 2000. The turnaround stems in part from bolstering the product's capabilities, but it may owe more to savvier marketing that clarifies how the product meets business needs. "We didn't do a good job of articulating just what mySAP.com is when we launched it," says Chris Larsen, president of SAP America. "And, in truth, it was little more than a portal at first."
Over the past 18 months, however, SAP has brought more core enterprise resource planning (ERP) functionality to the Web, and has partnered with CommerceOne and others to offer a broader set of E-business applications. The company also simplified its licensing terms, which analyst David Boulanger of AMR Research in Boston says has helped improve sales. "They've been low-key about the technological improvements," he says, "but have done very well in communicating just what the product can do for customers."
Alan Weiss, vice president of E-business for Osram Sylvania's general lighting division, based in Danvers, Mass., says that by moving its R3 technology into a Web environment, SAP has given clients new options for how to use it. "We created a portal for our customers, called mySylvania.com," says Weiss, "that lets us provide online ordering and other services, and because of mySAP.com we can integrate our portal with our ERP system very easily."
The portal is more than simply an extension of Sylvania's ERP environment: it also offers marketing information, training courses, and other forms of interaction. But because SAP has brought its products to the Internet via mySAP.com, extending the traditional foundation of a company's internal operations to its external relationships is now much simpler.
SAP is not alone, however. Oracle Corp., J.D. Edwards & Co., and PeopleSoft Inc. are all aggressively marketing Web-enabled, browser-based versions of their product suites. J.D. Edwards rolled out its OneWorld product four years ago, in fact, and now boasts more than 1,000 customers worldwide. The company differentiates itself from the other major ERP players by emphasizing collaboration. "While we can't claim to have seen just how the Internet would play out," says Dave Hill, vice president of industry solutions for J.D. Edwards, "we've designed our product so that companies can integrate best-of-breed solutions from any company. Other players in this space want customers to buy as many applications from them as possible."
Not without reason, if SAP's success is any measure. Larsen says 90 percent of mySAP.com revenue comes from either customers that are completely new to SAP or existing customers buying new applications or functionality. Out-of-the-box integration has been a major selling point for SAP, Oracle, and PeopleSoft, but Hill believes that the nature of E-business will validate J.D. Edwards's approach. "Flexibility and agility are critical today," he says, "and by redesigning our products into easily integrated components, we provide that, and let you use any other products as well."
SAP has also broken its monolithic suite into components, and has opened a new technology development center at its U.S. headquarters in Newtown Square, Pa. With 24,000 existing customers, it can do a booming business simply by moving them to mySAP.com. But it also has its sights set on the tens of thousands of mostly midsize companies that have never opted for ERP.
Whether these new Web-enabled versions offered by the major players can tempt them remains to be seen, but if SAP's recent quarter is any indication, there is life left in ERP yet. As Philip Carnelley, an analyst with Ovum, in London, puts it, "ERP was virtually dead, but by using the Web to turn its focus toward customers and suppliers, it has become a platform for just about everything you could want to do with your business."